Buy Jammu and Kashmir Bank; target of Rs 112: Prabhudas Lilladher

Prabhudas Lilladher's research report on Jammu and Kashmir Bank

JKBK's earnings was lower than expected on higher provisons and one-time opex cost but NII was much stronger on back of strong loan growth of 28% YoY and lower of cost of funds as CASA ratio was better and bank has refrained from renewing some of the high cost deposits. Asset quality deteriorated marginally (down on percentage basis) on some slippages from the restructured and corporate book from both J&K & and non-J&K state. Most delta lies in the J&K restructured book where moratorium has started to end and if repayments happen without delays we should witness significant addition to NII (8%of loans under J&K restucturing) and if any resolutions in IBC referred loan assets.

Outlook

We believe, better PCR, improving NIMs and recovery in loan growth augurs well and hence we retain BUY with revised TP of Rs112 (down from Rs135) based on 1.4x  Sep-19ABV.